By James Kwak
It’s been widely noted that financial reform is now entering a new phase as the action moves from Congress to the regulatory agencies that will write the hundreds of rules necessary to implement the reforms. During the congressional fight, the financial sector had a huge advantage in money and lobbyists, but we had one advantage: the fact that there was (from time to time) a lot of media coverage, and Congressmen care at least a little about public opinion.
In the rule-writing phase, the banks still have a huge advantage in money, lobbyists, and lawyers–and are hiring as many ex-regulators as they can to press their case. As our friend Jennifer Taub writes at The Pareto Commons:
What lies ahead, over the next year and beyond, will require far larger armies of lawyers, economists, finance experts and just plain able bodies and minds to monitor and influence the rulemaking process. Rumor has it that one bank alone plans to set up 100 teams of employees, tasked with particular rule makings. And that is just one bank.
Unfortunately, however, the pressure of the public spotlight is largely off, tilting the battlefield in favor of industry.
Our best hope is that the people in the regulatory agencies really do want to do the right thing, which is quite possible for people like Gary Gensler and Sheila Bair, and soon we’ll have John Dugan out of the OCC. This is a big reason why we don’t need neutral arbiters as the heads of these regulatory agencies–we need real advocates who will take the side of ordinary people and the real economy against a financial sector that is still too big and too predatory.
Yes, this is code for Elizabeth Warren, but it’s not just about Elizabeth Warren. The regulators in all these agencies should realize that they are going to spend the next two years fighting against the Wall Street banks and their legions of lobbyists. If they do their jobs right, they will never work in the financial sector again (except maybe at a hedge fund or a buy-side investment consultancy). And if they’re not up for that fight, we need someone else who is.